The Big Picture
The U.S. economy grew at a faster pace than expected in the fourth quarter of 2023, notching up 3.3%. Job growth also came in at a blistering pace for January, adding 353,000 jobs. This nearly doubled Wall Street expectations and ensured that interest rate cuts are unlikely in the near future.
The results have also left pundits arguing over whether the economy is running too hot, or just right.
Overall retail sales dipped 0.8% in January, with the only marked growth coming from restaurants and bars. While a pullback is generally expected after the holiday season, the January figure was higher than anticipated.
January’s Mixed Sales
Among our client stores total retail sales increased by 1% last month, but there was a big discrepancy between sales of menswear and women’s wear.
Menswear posted a 7% gain, with Clothing categories again outpacing all others, jumping 18% over last January. Jackets continue to drive this business. It appears men just want to have something new on hand in case of a special event.
In women’s, we saw a very different picture. Women’s wear dropped by 9% overall, with Special Order taking most of the hit, down by 19%.
Even Ready-to-Wear fell by 8%, as women decided to mine their existing wardrobes for the time being.
The good news is it looks like we are taking fewer markdowns than last year. Our clients posted a mark down rate of 37% in January compared to 47% a year ago.
Inventory Update
Last year we warned about growing inventory levels and challenged our client stores to bring these levels down as we approach this year’s unpredictable election season, and many stores have started to make progress. We received a lot of deliveries in early January, which left merchants bought through until around May. But, given that we believe that Spring will be the strongest season of the year, we are not too worried about it.
It’s worth remembering, however, that given that business has been so good for so long, we are due for a pullback. Make sure that you are keeping an eye on all the metrics that will serve as early warning lights in case of a slowdown.
Look closely at your stock-to-sales ratios (SSRs). Think of these ratios as representing months of stock on hand. If your February SSR is higher than 6, this could indicate that you are in a precarious position.
Blacks’ Bottom Line
Don’t get complacent when it comes to monitoring the health of your business, especially as we head into the crucial fall season.
